Oil Holds as Traders Assess Vaccines and Demand

(Bloomberg) -- Oil held a gain above $59 a barrel as prospects for faster, vaccine-aided economic growth boosted the outlook for energy demand.

West Texas Intermediate was steady after rising 1.2% on Tuesday. With vaccines being rolled out at a faster pace, the International Monetary Fund upgraded its global growth forecast to 6% this year. An industry report, meanwhile, showed a decline in American crude stockpiles but a gain in gasoline holdings.

Crude has swung around $60 a barrel in the last few weeks as investors weigh prospects for increased demand against the impact of fresh lockdowns, especially in Europe. Last week, the Organization of Petroleum Exporting Countries and its allies agreed to ease output curbs, betting the global market can absorb the additional supply. Recent U.S. data, including payrolls figures, have pointed to a strong recovery in the world’s biggest economy.

“The market is caught between the competing narratives of U.S. growth and Europe’s catch-up recovery, versus the uncertain supply conditions,” said Stephen Innes, chief global market strategist at Axi. “Liquidity is still low across all markets post-Easter, which may be exaggerating moves.”

Underpinning the OPEC+ stance are signs of progress in battling the pandemic, especially vaccination drives. U.S. President Joe Biden said he wants all American adults to be eligible for a coronavirus jab by April 19, two weeks earlier than his previous goal. In the European Union, most member states will have enough supplies to immunize the majority of people by the end of June.

Around the world, there’s a complex pattern of anti-virus curbs being eased or tightened. While California plans to fully reopen its economy in mid-June if the pandemic abates, Ontario will implement further restrictions soon. In Asia, India has seen record daily infections, and states have imposed fresh measures. South Korea saw the largest daily increase in 13 weeks and the government may tighten social-distancing rules later this week.

The American Petroleum Institute reported crude inventories fell by 2.62 million barrels last week, according to people familiar with the data. However, there was a 4.55-million-barrel gain in gasoline stockpiles and a 2.81-million-barrel increase in distillates stocks, puncturing the positivity somewhat.

Brent’s prompt timespread was 30 cents a barrel in backwardation. That’s a bullish pattern, with nearer-term prices trading at a premium to those further out, and compares with 16 cents two weeks ago.

This week, investors are also watching whether a nuclear deal with Iran is resurrected, potentially clearing the way for increased oil exports from the Middle Eastern country. After a round of discussions between Iran, the U.S., and other parties in Vienna on Tuesday, diplomats meet again on Friday.

© 2021 Bloomberg L.P.